Pro-Q: Procurement

• What you can (and should) source from China
• Where to search for manufacturers in China
• Doing international procurement
• Changes required in the headquarters
• Alternative procurement scenarios for foreign companies

The R&D Dept. will have to integrate new technical and economic constraints in the design of the next generation of products. This is not only because of the “inability” to hold the former standards but, much more importantly, because of the interest to fully exploit the competitiveness of what China can offer. Management of a development project will also have to account for the specificities of the overseas manufacturers’ environment (e.g. holidays, working hours, difference in time zones)

The Engineering Dept. will need to do some additional work on technical validation and support of the Chinese suppliers, and verification of compliance with all the safety standards;

The Logistics Dept. will have to set-up new flows coming in from China and adapt to a new set of principles. For example the long transportation time of containers may require monthly or weekly deliveries as opposed to daily deliveries. At the same time, local production provides shorter lead times to the local markets, and a reduction of the logistic costs for items produced and sold in China or Asia.

The Quality Dept. must re-examine its approach to supplier’s quality. For example waiting for the parts to be delivered to check their quality would be too risky and costly in case the parts had to be returned. Buyers should re-take control of the quality management. "You get what you inspect, not what you expect". It must be noted that, more often than not, switching to “far sourcing” puts a positive strain onto the head quarter to improve its own quality control procedures, concepts, and tools.

The Purchasing Dept. must also adapt their negotiation style and attitude. One cannot go aggressive on price reduction targets to Chinese suppliers without giving anything in return. This is only slightly due to the Chinese business culture (where the personal relationship is also critical). Most importantly, if the outcome of the negotiation is not a win-win deal, the Chinese supplier might start finding ways to cut his own production costs and regain his margin: an unprofitable deal for the supplier usually damages the quality of the parts.